Hospitality REITs - CGS-CIMB Research 2019-07-09: Slower Tourist Arrivals

Hospitality REITs - CGS-CIMB Research | SGinvestors.io ASCOTT RESIDENCE TRUST (SGX:A68U) CDL HOSPITALITY TRUSTS (SGX:J85) FAR EAST HOSPITALITY TRUST (SGX:Q5T)

Hospitality REITs - Slower Tourist Arrivals




Tourist arrivals are not growing fast enough

  • Singapore registered 1.48m tourist arrivals in May 19 (+0.9% y-o-y) largely due to a 5.3% y-o-y rise in tourists from Greater China and partially offset by a 7.5% y-o-y decline in tourists from South Asia. MTD May 19 tourist arrivals grew 1.49% y-o-y to 7.77m, slightly below our full-year expectation of 19.1m arrivals (+3% y-o-y). The largest group of arrivals MTD May 19 continued to be from Southeast Asia (33% of overall tourist arrivals), which posted 2.57m arrivals (-1% MTD, +0.04% y-o-y in May 2019).
  • On a more positive note, the average length of stay in MTD May 19 was a slightly longer 3.35 nights versus 3.32 days during the same period last year.


RevPAR growth underperformed and stayed flat

  • On the hotel front, while there was a 0.6% y-o-y increase in average room rates for MTD May 19, this was offset by a 0.5% decline in average occupancy to 84.7% which combined to give flat MTD May 19 RevPAR of S$185.
  • Upscale, mid-tier and economy hotels experienced 2.9%/0.2%/0.8% y-o-y declines in MTD May 19 RevPAR respectively while luxury hotels bucked this trend with a 3.3% y-o-y RevPAR growth. The flat RevPAR MTD May 19 was below our and market expectations of 3-5% growth.


Fewer events and economic uncertainties dampen tourist arrivals

  • Looking ahead, key events such as the Grand Prix in Sep and the International Champions Cup Singapore football championship scheduled to take place in 2H should attract tourist arrivals. However,
    1. the absence of large scale events such as Food & Hotel Asia 2018 and events related to Singapore’s ASEAN chairmanship which were present last year as well as
    2. weaker corporate travel due to ongoing trade tensions and slower economic growth would dampen demand for short-stay accommodation.
  • We expect weak 2Q results given tepid tourist arrivals which will drag RevPAR growth despite the low hotel supply.


Be selective when stock-picking



Highlighted Companies


ASCOTT RESIDENCE TRUST (SGX:A68U)

  • HOLD, Target Price S$1.22.
  • Serviced residences mainly cater for longer-stay customers. The weaker tourist arrivals would have lesser impact on Ascott Residence Trust than other hotel REITs. Singapore operation contributed ~12% of Ascott Residence Trust’s total gross profit in FY18.

CDL HOSPITALITY TRUSTS (SGX:J85)

  • ADD, Target Price S$1.97.
  • Singapore operation accounted for ~60% of CDL Hospitality Trusts’s NPI in FY18. Hence, weaker tourist arrivals would have a more material impact on its earnings. The reopening of Raffles Maldives would help to offset some of the impact.

FAR EAST HOSPITALITY TRUST (SGX:Q5T)

  • ADD, Target Price S$0.76.
  • In FY18, 69% of Far East Hospitality Trust’s revenue was derived from its hotels in Singapore. We expect weaker tourist arrivals to have lesser impact on its serviced residenceoperation (~12% of revenue in FY18). The rest of the revenue is generated by its commercial business.





EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | https://research.itradecimb.com/ 2019-07-09
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.220 SAME 1.220
ADD MAINTAIN ADD 1.970 SAME 1.970
ADD MAINTAIN ADD 0.760 SAME 0.760



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